Dividend Payment, Future Stock Price Crash Risk and Controlling Shareholder
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[Purpose] This paper takes Chinese companies as the object to investigate the correlation between dividend payment and future stock price crash risk, and how controlling shareholder impacts on this correlation. [Methodology] To prove the hypothesises, we used multiple regression analysis to investigate the impact of dividend payment on future stock price crash risk, and the impact of dividend payment of firms with a high tendency to overinvest on future stock price crash risk. In addition, we also investigated the impact of the controlling shareholder on correlation between dividend payment and future stock price crash risk. [Findings] The research results are as follows. First, the dividend payment is positively correlated with the future stock price crash risk. Second, for firms with a high tendency to overinvest, the positive correlation between dividend payment and future stock price crash risk is more higher. Third, controlling shareholders cannot suppress the positive correlation between dividend payment of firms with a high tendency to overinvest and the future stock price crash, which can be explained as that, compared to the influence of controlling shareholder, overinvestment propensity has a greater impact on the relationship between dividend payment and the future stock price crash. [Implications] This paper is the first to investigate the relationship between dividend payment, future stock price crash risk and controlling shareholders from the perspective of over-investment based on China.
Abstract
[Purpose] This paper takes Chinese companies as the object to investigate the correlation between dividend payment and future stock price crash risk, and how controlling shareholder impacts on this correlation. [Methodology] To prove the hypothesises, we used multiple regression analysis to investigate the impact of dividend payment on future stock price crash risk, and the impact of dividend payment of firms with a high tendency to overinvest on future stock price crash risk. In addition, we also investigated the impact of the controlling shareholder on correlation between dividend payment and future stock price crash risk. [Findings] The research results are as follows. First, the dividend payment is positively correlated with the future stock price crash risk. Second, for firms with a high tendency to overinvest, the positive correlation between dividend payment and future stock price crash risk is more higher. Third, controlling shareholders cannot suppress the positive correlation between dividend payment of firms with a high tendency to overinvest and the future stock price crash, which can be explained as that, compared to the influence of controlling shareholder, overinvestment propensity has a greater impact on the relationship between dividend payment and the future stock price crash. [Implications] This paper is the first to investigate the relationship between dividend payment, future stock price crash risk and controlling shareholders from the perspective of over-investment based on China.
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